Dorfman v. Jpmorgan Chase Bank, N.A.
| Decision Date | 18 October 2018 |
| Docket Number | No. 02-17-00387-CV,02-17-00387-CV |
| Parties | LOUIS DORFMAN; K I HOLDINGS, LTD.; SAM MYERS; J.M.D. RESOURCES, INC.; BILLY COGDELL BOWDEN; BARBARA STANDFIELD; STACEY DORFMAN-KIVOWITZ; JULIA DORFMAN; MARK DORFMAN; DAVID PHILIP COOK; CHERYL KING COOK; SAM Y. DORFMAN JR.; FRANK MORAVITS, INDIVIDUALLY AND AS TRUSTEE OF THE MORAVITS CHILDREN TRUSTS NOS. 1 AND 2; SHELBY MORAVITS; AND JERRY KORTZ, Appellants v. JPMORGAN CHASE BANK, N.A., IN ITS INDIVIDUAL CAPACITY AND AS TRUSTEE OF THE RED CREST TRUST; ORCA/ICI DEVELOPMENT; ORCA PETROLEUM, LTD.; AND ORCA ASSETS, G.P., L.L.C., Appellees |
| Court | Texas Court of Appeals |
On Appeal from the 342nd District Court Tarrant County, Texas
Before Sudderth, C.J.; Gabriel and Pittman, JJ.
Once again, we are asked to determine the effects of mineral leases on a 200.1-acre tract in Karnes County (the tract). Previously, we agreed with the trial court's interlocutory determination that Appellants held ownership and development rights to the tract under a 1944 judgment, which rendered a prior 1929 deed void ab initio. Orca Assets, G.P. v. Dorfman, 470 S.W.3d 153, 164, 167 (Tex. App.—Fort Worth 2015, pets. denied) (permissive appeal). We now must determine whether the trial court erred by granting Appellees judgment as a matter of law on Appellants' tort claims, which were based on Appellees' actions in entering into the disputed mineral-rights transactions on the tract. We conclude that Appellees were entitled to judgment as a matter of law on Appellants' tort claims primarily because Appellees had a reasonable, good-faith basis on which to assert title.
To place the current issues in context, we find it necessary to replow some of the same factual ground as before. In 1901, William Mayfield conveyed the tract to Mary Moravits. In 1929, Mary and her husband J.W. Moravits conveyed an undivided 15/16 interest in all minerals to H.J. McMullen, retaining a 1/16 royalty interest. McMullen then conveyed the executive right and the right to execute mineral leases to his oil and gas company, McMullen Oil & Royalty Co. But McMullen retained the right to receive royalty payments. When McMullen died in 1934, his interest in thetract passed to his wife Susie McMullen, who remarried and became Susie Langille. Upon her death in 1938, her interest in the tract was placed in a trust—the Langille Trust—that she had created for the benefit of her surviving children. The trustee of the Langille Trust eventually became appellee JPMorgan Chase Bank, N.A.
In 1943, Mary Moravits and her sons filed suit to cancel the 1929 deed to H.J. McMullen. During the litigation, McMulllen Oil disclaimed any interest in the tract. In 1944, the trial court signed a judgment that "cancelled and held for naught" the 1929 deed and declared that title to the minerals belonged to Mary Moravits and her sons.
In 1961, JPMorgan's predecessor as trustee of the Langille Trust conveyed any mineral interests remaining in the Langille Trust to McMullen Oil but reserved a royalty. In 1966, McMullen Oil dissolved and conveyed to the Langille Trust any mineral interest that it owned.
The Langille Trust terminated in 1984, and the res was distributed to Susie Langille's grandchildren. The grandchildren created the Red Crest Trust to hold their inherited mineral interests. As with the Langille Trust, JPMorgan eventually became the trustee of the Red Crest Trust through several bank mergers. The 1944 judgment, voiding the 1929 deed and declaring Mary Moravits and her sons to be the owners of the tract's mineral interests, was recorded in Karnes County in 1991.
On April 6, 2009, the Moravitses1 leased the mineral rights on thirty-three acres of the tract to Moffit & Associates, Inc. The lease was recorded in Karnes County on June 10, 2009. On July 28, 2010, Moffit assigned its lease interest to Petro-Hunt, LLC. Moffitt recorded the assignment in Karnes County on September 20, 2010.
During the summer of 2010, JPMorgan as trustee of the Red Crest Trust began receiving inquiries from oil-company landmen about possible leases for the mineral rights on at least a portion of the tract. One of those inquiries came from Joan Stewart, a landman for appellee Orca Assets G.P., L.L.C. (Orca Assets). On September 8, Stewart emailed Philip Mettham, a JPMorgan employee who was primarily responsible for the oil and gas interests contained in the Red Crest Trust, and stated that Orca Assets wanted to lease "the 458.1 acres in Karnes," which included the tract, for $3,500 per acre. Stewart also stated that "there seems to be a problem with the title" but that Orca Assets was "prepared to defend" the title on behalf of the Red Crest Trust because she believed the problem could "be cured in . . . favor [of the Red Crest Trust]." She gave no information regarding the nature of the title "problem," and Mettham did not inquire further. Mettham stated that at the time the lease with Orca Assets was signed, "nothing in [JPMorgan's] records[showed] that the Red Crest Trust did not own that acreage." He further explained that Orca Assets was aware the lease would be granted "without warranties."
On October 5, JPMorgan as the trustee of the Red Crest Trust leased the tract's minerals to Orca Assets for a three-year primary term.2 The lease provided that it was "made without warranties of any kind, either express or implied." The lease contract required Orca Assets to record a "Memorandum of Oil and Gas Lease" in Karnes County, which occurred on October 18. As relevant to this appeal, the recorded memorandum described the leased premises: "200.1 acres, more or less, being all of the land described in Deed from William I. Mayfield to J. W. Moravit[s], dated March 16, 1901 and recorded in Volume Y, Page 621 of the Deed Records of Karnes County, Texas."
On November 3 after the lease between JPMorgan and Orca Assets was signed and recorded, two employees of appellee Orca Petroleum, Ltd.—land administrator Tiffanie Cozean and land manager Ellis McConn—exchanged the "runsheets" for the tract by email with no comment.3 The runsheets showed the Moravitses' 2009 leasesto Moffitt for thirty-three acres of the tract but not the 1944 judgment. The record does not clearly indicate who prepared the runsheets for Orca Assets or when they were prepared. Before signing the lease with Orca Assets, Mettham had not reviewed any runsheets.
On November 15, Dorfman Production Company entered into an agreement to buy 50% of the mineral interests to two 33.62-acre parcels contained in the tract from Frank Moravits, individually and as the trustee for two Moravits trusts (Frank). Frank represented that he "own[ed] marketable title to the Conveyed Mineral Interest" and that "to the best of [his] knowledge, there is an existing, written, recorded, oil, gas, and mineral lease covering all or a portion of the Lands." But the agreement specified that if Dorfman Production discovered a title defect that Frank was unable to cure, Dorfman Production "in its sole discretion" could terminate the agreement. On the same day as the agreement, the chairman of Dorfman Production,appellant Louis Dorfman, forwarded the agreement to a landman, Roger A. Soape, to run a title search of the two parcels.
On November 30, Soape informed Louis that Frank "owns full mineral interest in" the two parcels and that there were "no outstanding royalty interest[s] of record." The attached documentation showed the 1944 judgment, rendering the 1929 deed "NULL," but did not reflect JPMorgan's lease to Orca Assets, presumably because Soape was tasked with researching title and not any leasehold status. On December 1, Frank signed deeds conveying 50% of the mineral interests of the two parcels in favor of Dorfman Production. On December 30, Dorfman Production conveyed its mineral interest in the two parcels to the Dorfmans.4 Orca Assets states that this conveyance was recorded in Karnes County on January 3, 2011, but there seems to be no summary-judgment evidence supporting this assertion.5
On December 10, 2010, close in time to Frank's conveyance to Dorfman Production, Petro-Hunt conveyed and assigned its interest in the Moravitses' 2009 lease to Petrohawk Properties, LP.
To sum up, Petrohawk's and the Dorfmans' interest in the tract flowed from the 1901 deed from William Mayfield to Mary Moravits. JPMorgan's and Orca Assets' interest in the tract flowed from the 1929 deed from Mary and J.W. Moravits to H.J. McMullen.
On March 31, 2011, McConn contacted an Orca Assets landman, Tony Villalon, and enclosed a copy of the 1944 judgment, which McConn had received from Petrohawk—the ultimate assignee of Moffit's interest in its 2009 lease from the Moravitses. McConn stated that Orca Assets was getting a "title opinion" on the issue but noted that Orca Assets' runsheets had not shown the judgment, which he recognized "basically states that the Mineral Deed from J.W. Moravits to H.J. McMullen is null and does not convey the minerals." Villalon responded that in his view, Orca Assets' lease on the tract was "valid" and "good," but he asked Cozean to get the "entire file" from Karnes County. Villalon informed McConn that the requested title opinion might not be useful depending on what documents the author relied on, but he averred that the opinion could be disregarded or amended based on any missing documentation.6
On May 23, Orca Assets sent a memo to Petrohawk, explaining that Orca Assets believed its interest in the tract was superior to Petrohawk's because the Red Crest Trust—Orca Assets' lessor—had been a bona fide purchaser, notwithstanding the 1944 judgment.
On June 3, 2011, an attorney representing at least some of the Dorfmans emailed Mettham about the Dorfmans' competing-title claim and attached the 1929...
To continue reading
Request your trial